It's funny- a lot of people are hesistant to buy into bitcoin because they think it might be subject to regulatory attacks by the government. If the government did start shutting down exchanges on a massive scale and making bitcoin transactions illegal, it would actually artifically inflate the value of bitcoin, in the same way that illegalizing cocaine artificially inflates the price by 500 to 1000%. The value of bitcoin cannot be destroyed, and if it's more difficult to obtain them, it will just make them that much more valuable.
Do you really think a business would want to be involved in bitcoin transactions if bitcoins would become illegal ?
I think not, so an average person will not be using bitcoins, except maybe for some illegal stuff.
So declaring bitcoins illegal will end bitcoins as we know it today.
This is true, if you are thinking in the old way where nations mattered. Illegalizing bitcoin transactions would only be possible under a one world government. Bitcoins could be made illegal, but then you could probably sell all of your bitcoin on an exchange somewhere like Vanuatu, Tajikistan, or Cape Verde for the next crypto currency. Since it seems to take a few days to generate cryptocurrencies there could be an endless string of them. As has often been observed on this forum, the only way to kill bitcoin is to kill the internet.
A good metaphor would be riot police with shields and clubs standing next to the ocean and trying to stop a tsunami.
The only way for the powers that be to retain control will be a one world government with immediate arrest for any evidence of an off book transaction. This is not implausible. This is WAY bigger than the Protestant reformation, and that resulted in hundreds of years of war...